Managing Editor

Playing the Agriculture Game

Alonzo - Even though there's no physical portfolio behind an ETN, the note's value is derived from futures index. The index methodology determines which futures are to be included and how they'll be rolled forward. Thus, the futures curves affects ETNs as well as ETFs. The difference is that the ETN won't be subject to slippage and tracking error as an ETF might.

Emily - Some commodity company stocks (and these would be on the 'producer' rather than the 'consumer' side, i.e., ADM produces soybeans and other foodstuffs, while Kellogg's uses them) in fact outperformed agricultural ETFs or ETNs. MOS, in particular. But look at the table. The stocks' volatilities were HIGHER than those of the commodities ETFs and ETNs. The stocks' correlations to SPY, too, were higher than those of the ETFs and ETNs.